The Infona portal uses cookies, i.e. strings of text saved by a browser on the user's device. The portal can access those files and use them to remember the user's data, such as their chosen settings (screen view, interface language, etc.), or their login data. By using the Infona portal the user accepts automatic saving and using this information for portal operation purposes. More information on the subject can be found in the Privacy Policy and Terms of Service. By closing this window the user confirms that they have read the information on cookie usage, and they accept the privacy policy and the way cookies are used by the portal. You can change the cookie settings in your browser.

Global Reserves Management

Source

Abstract

The article presents factors behind rapid growth of foreign exchange reserves held by central banks (in ten years reserves more than tripled, to over 5 trillion dollars in 2006). Authors present a new concept, OCHAR-Opportunity Cost of Holding Ample Reserves, which is defined as a forgone GDP growth due to too conservative reserve management by central banks. Paper presents OCHAR estimates for 33 countries accounting for three-quarters of world's foreign exchange reserves. Within the framework of growing central bank transparency one can observe that best practices are adopted by an increasing number of central banks, which includes flexible inflation targeting as well as efficient reserves management. It can be said that central banks embarked on a collective reserves diversification journey. Article presents some hypotheses on the possible outcomes of this diversification process and postulates that new steady states of relative asset prices may be significantly different from those seen in the XX century. Authors consider the global stability risks within the context of new global reserves management strategy and postulate that central banks and governments in countries-stakeholders of global imbalances should step up efforts to preserve global price stability and global financial stability.

Accessibility options

You can change the active elements on the page (buttons and links) by pressing a combination of keys:

TAB go to the next element

SHIFT + TAB go to the previous element

Financed by the National Centre for Research and Development under grant No. SP/I/1/77065/10 by the strategic scientific research and experimental development program:
SYNAT - “Interdisciplinary System for Interactive Scientific and Scientific-Technical Information”.